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AP-5B LO 1 Webbermart Company manufactures fasteners for use in machine production. It currently produces 100,000 units of Fastener 99 per year. This part is
AP-5B LO 1 Webbermart Company manufactures fasteners for use in machine production. It currently produces 100,000 units of Fastener 99 per year. This part is used in the manufacturing of many products produced by Webbermart. The breakdown of the cost per unit for Fastener 99 is shown below. Direct Materials Direct Labor Variable Overhead Fixed Overhead Unit Cost $2.60 0.80 0.65 2.04 $6.09 The fixed overhead cost (at $2.04/unit) would still remain with the company even if Webbermart stops manufacturing Fastener 99. An outside supplier has offered to sell the same part to Webbermart for $7.20. The machine Webbermart uses to produce Fastener 99 can only be used to make that part so it cannot be sold if the company decides to buy Fastener 99. Required a) Should Webbermart Company make or buy Fastener 99? Required a) Should Webbermart Company make or buy Fastener 99? b) What is the maximum price Webbermart should be willing to pay an outside supplier for the part? c) If Webbermart buys the part for the price offered by the supplier, by how much will operating income increase or decrease
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